The Dubai government unveiled plans to recapitalise its indebted Dubai World flagship and repay Nakheel bonds in full, injecting what it said was $9.5 billion in new funding, but without new aid from Abu Dhabi.

In a statement, the government said $5.7 billion in remaining funds from a loan made by Abu Dhabi would provide the lion's share of the overall $9.5 billion and would also include what it called 'internal Dubai government resources'.

'There is no new money from Abu Dhabi,' said a government official on a conference call. 'This proposal is based on amounts remaining from the loans provided previously by the government of Abu Dhabi and from internal resources from the government.'    

Dubai World said the total amount of debt held by creditors excluding the Dubai Financial Support Fund was $14.2 billion at the end of December. Those creditors would receive 100 percent principal repayment through the issuance of two tranches of new debt with five and eight-year maturities, it said.

The Nakheel bond payback offer came as a surprise, as does the absence of a more visible role by wealthy neighbour Abu Dhabi, which has already pledged $10 billion in aid to debt-struck Dubai.

The government said the bond repayment depended on creditors accepting the proposal.

Dubai World, the emirate's flagship conglomerate, which includes the QE2 ocean liner and Barneys department store among its high-profile assets, said last year it would delay repaying $26 billion in debt linked mainly to property units Nakheel and Limitless World.

The government said it was also offering to recapitalise Dubai World through the equitisation of the Government's $8.9 billion claim and a commitment to fund up to $1.5 billion in new funds.

Turning to property giant Nakheel, the government said it would inject $8 billion in new funds and that it would equitise $1.2 billion of the government's claim.

Bank creditors will be asked to restructure their debt at commercial rates, the government said. Trade creditors would be offered a significant cash payment and a tradable security, the statement said.

 'Assuming sufficient support for the proposal, the 2010 and 2011 Nakheel Sukuk will be paid as they fall due,' the statement said.

Core creditors representing 97 banks met on Wednesday to finalise months of talks on how Dubai World can restructure the debt, about a quarter of Dubai's estimated total debt of $101 billion. - Reuters